Nonrefundable Credit

Nonrefundable Credit means:
a credit or other debt instrument that is not paid to the taxpayer if it exceeds his or her tax liability (e.g., targeted jobs credit, low-income housing credit).

When the amount of a credit is greater than the tax owed, taxpayers can only reduce their tax to zero; they cannot receive a “refund” for any excess nonrefundable credit.

A dollar-for-dollar reduction in the tax that can be deducted directly from taxes owed, but not below zero. tax = $300; credit calculated = $500. The credit can reduce the tax of $300 to $0 but the difference of ($200) will not be refunded to the taxpayer. It may be carried over to a future year.